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2  Question 3 is a ballot initiative that will be on the NV general election ballot in November  New 2% business tax on GROSS revenue Businesses with more than $1 million in annual gross revenue would have to pay Would have to pay EVEN in years with no profit Equivalent of an almost 15% corporate income tax – higher than CA

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 Businesses with more than $1 million in annual gross revenue would have to pay Creates a “fiscal cliff” for businesses Businesses that gross one penny more than $1 million would pay the 2% Margin Tax based on the entire million  Businesses could ONLY deduct Modified Business Tax (MBT) liability plus one of three deductions: Cost of goods sold Costs of employee compensation (up to $300K/employee) Standard 30% deduction 3

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 NO guarantee of more money for education Legislature would have complete authority to divert funds Legislature has history of diverting funds designated for education (ex room tax diversion)  NO plan for how any funds going to education would be spent Initiative provides no plans or requirements to ensure that revenues go to classroom instead of the hands of bureaucrats 4

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For businesses, would make NV one of the five highest taxed states in which to operate Although 87% of NV businesses would be exempt from directly paying the tax, 80% of NV businesses are considered micro-businesses, meaning they do not employ anyone The vast majority of job-generating businesses in NV would be subject to the tax. Thousands of small businesses would NOT be exempt 6

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8,860 jobs when indirect impacts included $413 million in reduced labor income when indirect impacts are included A total of $1.1 billion in reduced economic activity when “ripple” effects are considered 7 According to Applied Analysis, the effects of the Margin Tax Initiative translates to:

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8  Initiative would increase consumer costs Would impose the new tax on almost all types of goods and services sold including: Food, clothing, gas, electricity, telephone services, prescription medicines, childcare and medical care Ultimately, some or all of the increased costs would be passed on to Nevada consumers.

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 Rents, reimbursements and commissions would be subject to the Margin Tax Initiative o Reimbursement expenses, such as common area maintenance fees would likely be included in total revenue  Would both a broker and an agent, if both exceed the $1 M threshold, be subject to the proposed Margin Tax? o The initiative does specifically exempt “pass-through” revenue, revenue received by a business entity solely on behalf of another o This provision would likely limit double taxation 9